The Effects of Mergers on Prices, Costs, and Capacity Utilization in the U.S. Air Transportation Industry, 1970-84 / Frank R. Lichtenberg, Moshe Kim.

By:

Lichtenberg, Frank R

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3197.Publication details: Cambridge, Mass. National Bureau of Economic Research 1989.Description: 1 online resource: illustrations (black and white)Subject(s):

L - Industrial Organization

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Abstract: We analyze the effect of mergers on various aspects of airline performance during the period 1970-84, using a panel data set constructed by Caves et al. Estimates derived from a simple "matched pairs" statistical model indicate that these mergers were associated with reductions in unit cost. The average annual rate of unit cost growth of carriers undergoing merger was 1.1 percentage points lower, during the five-year period centered on the merger, than that of carriers not involved in merger. Almost all of this cost reduction appears to have been passed on to consumers. Part of the cost reduction is attributable to mergerrelated declines in the prices of inputs, particularly labor, but about two-thirds of it is due to increased total factor productivity. One source of the productivity improvement is an increase in capacity utilization (load factor).

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w3197 (Browse shelf(Opens below))	Not For Loan

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December 1989.

We analyze the effect of mergers on various aspects of airline performance during the period 1970-84, using a panel data set constructed by Caves et al. Estimates derived from a simple "matched pairs" statistical model indicate that these mergers were associated with reductions in unit cost. The average annual rate of unit cost growth of carriers undergoing merger was 1.1 percentage points lower, during the five-year period centered on the merger, than that of carriers not involved in merger. Almost all of this cost reduction appears to have been passed on to consumers. Part of the cost reduction is attributable to mergerrelated declines in the prices of inputs, particularly labor, but about two-thirds of it is due to increased total factor productivity. One source of the productivity improvement is an increase in capacity utilization (load factor).